Is it time to bail out of the Australian retail property market?
If we take a look back to the 2008 mortgage crisis in America, which resulted in a worldwide economic downturn, Australia was one of the few countries which managed to avoid recession. The economy has on the whole gone from strength to strength although it has been dragged along by the mining and natural resource sectors which have been by far and away the most active business arena is in Australia. Over the last few years a number of experts in the retail property sector have made a significant amount of money riding the economic wave but there are signs this may be coming to an end.
Nobody is suggesting that a retail property crash is on the horizon but some of the more influential names in the Australian retail property sector are certainly readjusting their positions.
What is happening in the Australian retail property sector?
Over the last few months we have seen a number of supermarkets across Australia separating their property assets from their trading operations as a means of selling these on to raise money. We’ve also seen the renowned Lowry family reducing their exposure to various retail property assets and now the Commonwealth Bank of Australia is looking to sell off management rights to its $20 billion real estate portfolio.
The real estate portfolio of the Commonwealth Bank of Australia is held in an array of investment trusts and stand-alone companies. While the bank has not indicated a full-scale retreat from the retail property sector many experts believe this is stage one of a reduction in the company’s exposure to the sector. It may take some time to fulfil the rumoured endgame but some in the Australian property arena are now starting to take notice.
Quote from PropertyForum.com : “Australia is proving popular among British people searching online for overseas property, moving up to fourth place in the latest Rightmove Overseas chart.”
Retail sector performance
As we touched on above, despite the fact that the headline figures relating to the Australian economy since 2008 have been very impressive, the retail sector has been disappointing. The Internet has made a major dent in the commercial operations of many retailers and indeed the value of property in the retail sector has been impacted. Over the years a number of prominent property experts have picked up retail assets at “rock bottom” and many are now looking towards cashing in these investments.
The fact is that despite the general good health of the Australian economy there is a feeling that the government has in many ways hung the retail sector out to dry. The vast majority of the focus of politicians has been upon the mining and natural resource industries leaving other sectors in Australia to fend for themselves. Now that we are approaching the September election we may well see politicians take more notice of areas such as the retail sector but the reality is that for many businesses it is too little too late.
Is this the beginning of a property downturn?
The Australian retail sector is not the only one to suffer due to the general economic turmoil around the world as well as the ongoing influence of the Internet. Nobody truly expects a crash in retail property values but it may well be that, when taking into account the worldwide situation, the Australian sector has potentially moved a little too far ahead. It looks as though we may see some adjustment of property portfolios across Australian investors although at this moment in time it is too early to say whether this is the start of a major downtrend or perhaps a realignment of the market to more realistic levels.